Europe looks to pension reforms to ease economic crisis

IN ROME — Vincenzo Di Vita celebrated his retirement after nearly 40 years with the Italian postal service with a modest toast given by his co-workers in early December. He planned to hold a party at his home a few weeks later — but by then, he could no longer afford it.

Just days after Di Vita accepted a buyout designed to carry him until his government pension kicked in, Italian Prime Minister Mario Monti unveiled a program of tough measures to rein in public spending in the deeply indebted nation. Among the most radical changes: raising the minimum retirement age for men with Di Vita’s work experience from 62 to 65.

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Retirement ages in the Euro zone and the U.S.

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Di Vita was suddenly without a job and without a pension.

As many as 390,000 older Italians are in a similar predicament, and these “esodati” have moved to the center of the debate over whether austerity cuts are going too far.

As countries in Europe and beyond grapple with ballooning deficits and debts, government spending on pensions has become a popular target. The International Monetary Fund has recommended raising retirement ages to ease the financial burden associated with rising life expect­ancy.

More than four-fifths of the countries in the Organization for Economic Cooperation and Development, which represents advanced and emerging economies, are raising retirement ages or planning to do so. Fourteen countries — including several on the front lines of the European financial crisis, such as Italy, Spain, Greece and Ireland — are looking to increase their retirement ages to between 67 and 69 by 2050.

In Europe, the push for higher retirement ages represents a dramatic rewrite of the continent’s postwar social compact, and measures that keep people working longer could prove one of the most significant social legacies of the debt crisis.

But turning their citizens’ retirement plans upside down has been politically risky for leaders in a region that has the highest concentration of seniors in the world.

Greeks took to the streets in violent protest two years ago when the cash-strapped government in Athens agreed to austerity measures, including boosting the retirement age, in return for receiving a $150 billion bailout from the IMF and other European countries. In Spain, Prime Minister José Luis Rodríguez Zapatero was voted out of office in December after he bumped the country’s retirement age from 65 to 67 earlier in the year. And in France, President Nicolas Sarkozy provoked a nationwide strike when he backed a proposal to lift the minimum retirement age from 60 to 62. He was ousted in elections in May by challenger Francois Hollande, who vowed during his campaign to roll back the measure and moved to do so shortly after he took office.

The retirement ages in even some of the euro zone’s healthiest economies have been raised. Germany and Denmark, for instance, have moved to cut back on pension costs as has Britain, the largest European economy outside the euro zone.

The issue has become so controversial in the United States that little action has been taken to address increasing retirement costs. Seniors are up in arms over proposals to revamp Social Security, and liberal advocacy groups have strenuously objected that changes would disproportionately harm the poor and minorities.